Adapt or withdraw? :evidence on technological changes and early retirement using matched worker-firm data

Abstract

Older workers typically possess older vintages of skills than younger workers, and they may suffer more from technological change. Experienced workers never the less have accumulated human capital that make them suitable for adopting new technologies. On the other hand, to adjust to new technology, workers must invest in training and this may not be worthwhile for the oldest workers. We exploit the approach by Bartel and Sicherman (1993) to identify this effect by estimating the retirement response to technological change dependent on how often it occurs. If technological change occurs often, workers continuously invest in on-the-job training which may isolate them from the negative effect of technological change. We examine two hypotheses about the effects of technological changes on early retirement measured for workers from the age of 50 to mandatory age of retirement at 67. First, we examine whether workers in firms with higher rates of anticipated technological change retire later than workers in firms with lower rates of technological change. Second, we examine if (unanticipated) technological change are positively correlated with earlier retirement. We use a matched employer-employee data set with a rich set of controls for worker, firm and local labour market characteristics, and firm level measures of anticipated and not-anticipated technological change. We find a negative correlation between early retirement and anticipated technological change only for the oldest male workers (62 to 66). Further, we find a higher probability of transition to retirement for workers above 60 for firms introducing new process technologies.